IT Consulting from the Trenches

HIPAA-MANDATED CODE SETS

Title II of HIPAA contains "Administrative Simplifications" provisions. One provision requires a standard code set for all electronic transactions. There are three accepted code sets. This article discusses the primary one.

Most of the material for this blog entry came from the book shown here.

I had written a blog entry that went over the substance of the “Administrative Simplification” provisions of HIPAA. Among other things, the entry mentioned the HIPAA-mandated standards for electronically transferring medical data from one party to another. Click here to open a new tab or window of that blog entry.

In the process of finalizing the blog entry, I came across an excellent book that filled in some gaps. Its title is “Learning to Code with ICD-9-CM for Health Information management and Health Services Administration 2007” (Falen, Liberman). The tome is a student textbook meant for aspiring medical coders but its opening chapters succinctly explain medical codes and their role in HIPAA.

This blog entry is outlined like so:

1. The primary purpose of medical coding
2. The secondary purpose of medical coding
3. Other uses of medical coding
4. History of the ICD-9-CM (this is the name of the set of medical codes)
5. Format & Content of ICD-9-CM
6. The future of medical coding
7. Summary

The relevance of medical coding in the HIPAA scheme of things is explained in the sixth section. It’s located near the end because preceding sections provide useful background information. Here’s how medical coding fits in the big picture:

Medical codes have been standardized for electronic health care transactions. HIPAA requires every provider who does business electronically to use the same health care transactions, code sets, and identifiers. This applies to ten types of electronic transactions that must meet these standards. Examples are: claims, claims status, payments, and remittances. These transactions must use three code sets approved by HIPAA. These are ICD-9-CM, HCPCS, and CPT. The healthcare industry is, by and large, already familiar with these sets since they’re already being used.

Images of the two most-commonly used transaction forms are also shown. The codes are used in these forms.

• Form UB-92 is used by hospitals for electronic transactions.
• Form CMS-1500 is used by physicians for electronic transactions.
  

You can click on any image to enlarge it.

THE PRIMARY PURPOSE OF MEDICAL CODING

Data on the types and number of diseases in the U.S. provide important information to help us understand the overall condition of our nation’s health. Information contained in patients’ medical records, whether paper-based or electronic, holds great value in letting us know what is happening in health care. It is through the study of patient diseases and treatments that we can begin to understand, improve, and standardize quality health care; improve patients’ medical outcomes; and improve patient services at reduced cost. Each individual success at the patient provider and the institutional level (micro level) adds to our collective health success at a national level (macro level).

Codes tell us the important story of each patient’s health-care encounter. The quality of coded data provides us with health-care information to support our best decisions to improve the quality of patient care.

The International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) is a widely used classification system for coding, classifying, and identifying patient diseases and procedures in the United States. It is a standardized medical communication tool that serves all health-care stakeholders, including physicians, health-care networks, hospitals, long-term care and outpatient facilities, insurers or other payers of care, employers, government officials, managed care organizations, patients, and countless other interested parties.

To quickly process and communicate important health-care data within this complex and dynamic health-care environment, medical coding systems transform verbal medical descriptions of patient diseases and procedures into codes that are communicated electronically (e.g., diagnosis code 428.0 indicates congestive heart failure). Codes, rather than long narrative descriptions of diseases and procedures, can be quickly entered into information systems and processed to create health-care information.

This information is used for medical research to study and improve the quality of patient care, and can also be transmitted to third-party payers to facilitate payments to health-care providers. Codes also inform payers the medical services they are paying for. They can substantiate that the care rendered was medically necessary, health-care resources were properly utilized, and that the health-care provider’s chargers were reasonable.

THE SECONDARY PURPOSE OF MEDICAL CODING

The secondary purpose of medical coding is to simplify the reimbursement processes of prospective payment systems (PPS).

Over the past several years, to control and reduce skyrocketing health-care costs, the U.S. government’s Medicare and Medicaid programs and most other private third-party payers of health-care services have used medical coding systems to structure prospective payment rates to health-care providers for services to their patients.

Prospective payment systems (PPS) are reimbursement formulas determined in advance of the health-care services rendered that are not based on the provider’s costs to treat the patient. The provider knows prospectively what the payment will be for health-care services rendered. These payments are predetermined based on the average cost of health-care resources necessary to treat the patient’s condition as revealed through diagnosis and procedure codes.

OTHER USES OF MEDICAL CODING

In addition to reimbursement, coded information is used by health-care facilities to determine and plan for the types of services that are needed within communities. For example, coded data revealing a high incidence of coronary artery disease within a hospital may indicate the need to recruit more cardiologists and open a diagnostic heart catheter laboratory. Also, coded data can be analyzed to help develop and implement local, state, and national health-care policy (e.g., smoking cessation, obesity education, anti-drug policies, and early-pregnancy education) and to determine mechanisms to contain health-care costs.

Coded information helps to identify patient cases to develop best-care practices as clinical guidelines to assist physicians in providing consistent quality care for particular diseases and to identify patient cases to further clinical research. With the growth of managed care organizations, coding also serves as the basis for disease management through various health-care settings and provider networks. For example, as a patient travels from the doctor’s office to a hospital to a home health agency or skilled nursing facility, coding provides a flow of patient information to promote the continuity of patient care and preventive care services. Foremost, quality coded data provide information to help health-care administrators make good decisions to improve Medicare for the patients they serve. Providing quality care to patients within their communities is the unifying mission of all health-care providers.

HISTORY OF THE ICD-9-CM

Historically, the ICD-9-CM's Tabular List of Diseases (volume 1) and the Alphabetic Index to Diseases (volume 2) represent a clinical modification (CM) to the World Health Organization’s (WHO) publication International Classification of Diseases, 9th Revision (ICD-9). The WHO collaborates with the Unite Nations and assists governments in strengthening their health services whenever possible. Through ICD, the WHO collects international information of the diseases of member populations. However, this international version does not completely meet the needs of the United States because of its emphasis on the more acute infectious diseases seen in developing countries rather than on the chronic diseases seen in the United States (such as arteriosclerosis and hypertension). For that reason, WHO's ICD-9 has been clinically modified (CM) for use in the United States. The result is the ICD-9-CM (for International Classification of Diseases, 9th Revision, Clinically Modified).

The United States added a third volume to accommodate the U.S.-specific diseases. This is the Alphabetic Index to Procedures and Tabular List of Procedures (volume 3). Code revisions and new codes for the ICD-9-CM have been developed annually by the Centers for Medicare & Medicaid Services (CMS) and the National Center for Health Statistics (NCHS). ICD-9-CM codes are updated twice a year.

FORMAT & CONTENT OF ICD-9-CM

An effective (coding) classification system such as ICD-­9-CM must follow three basic rules:

1. the set of categories should be derived from a “single classification prin­ciple,” meaning that the classification should be organized by anatomic body sites (e.g., appendix and heart), causes of disease (e.g., infection and tumors), or names of diseases;
2. the set of categories should be “exhaustive,” meaning that there is a code provided for every disease and procedure (i.e., a place to code ev­erything); and
3. the categories within the classification should be “mutually exclusive” (i.e., each disease and procedure must have a unique code to retain the integrity of the data).

ICD-9-CM is “officially” published by the federal government as a three-volume set that includes the Tabular List of Diseases (volume 1), the Alphabetic Index to Diseases (volume 2), and the Alphabetic Index to Procedures and Tabular List of Procedures (volume 3).

THE FUTURE OF MEDICAL CODING

The World Health Organization (WHO) published ICD-10 in 1992. Since then, CMS has made considerable progress with its clinical modification (CM) of ICD-10. The resulting code set will be ICD-10-CM.

HIPAA will eventually be amended to make ICD-10-CM the official coding standard. Under the Title II “Administrative Simplification” provisions of HIPAA, federal standards mandate the simplification of the electronic transfer of medical data for health-care providers, health plans, and health-care clearinghouses. The “Administrative Simplification” provisions have four parts that specify the requirements for:

1. Electronic health transaction standards including standard code sets.
2. Unique identifiers for patients, providers, employers, and health plans.
3. Security and Electronic Signature Standards for health information maintained or transmitted electronically.
4. Privacy and Confidentiality Standards for protected health information (PHI).

Within the provision for electronic health transaction standards, health-care organizations must use standard code sets for all health transactions. HIPAA currently uses three code sets: ICD-9-CM, Current Procedural Terminology (CPT), and Healthcare Common Procedure Coding System (HCPCS).

Currently, hospital inpatient services use the entire ICD-9-CM code set. Hospital outpatient encounters are reported and billed using ICD-9-CM diagnosis codes only.

Physicians use ICD-9-CM diagnosis codes and CPT and/or HCPCS procedure codes to report and bill for their services.

Hospitals use the Uniform Bill 92 (UB-92) and physicians use the CMS-1500 as standardized billing forms to report required patient information to Medicare, Medicaid, and other third party payers. Patient data within the claim forms are encoded with ICD-9-CM diagnosis codes. Procedure codes, on the other hand, use either ICD-9-CM, CPT, and/or HCPCS. These are the claim forms—UB-92 and CMS-1500—that are routinely submitted elec­tronically by providers to a fiscal intermediary, carrier, insurance company, or health plan for processing and payment.

For paper claims, hospitals use a different form, UB-04. This is the form used to bill Medicare Part-A and to report services to other insurance companies for payment.

The electronic exchange of data between a provider and insurance com­pany is called electronic data interchange (EDI). Sometimes a provider con­tracts with a clearinghouse to assist in the processing of electronic claims due to the varied data formats required by different insurance companies and health-care plans. By standardizing health-care administration, HIPAA expects to eventually simplify, improve, and reduce the cost of health-care administration. The goal is to redi­rect the savings to patient-care focused activities.

Physicians use the CMS-1500 to bill Medicare Part-B and insurance companies for payment.

SUMMARY

Medical records contain valuable information about a patient's medical his­tory. Classification systems such as ICD-9-CM translate verbal descrip­tions from these medical records into codes that tell an important story. Codes are a standard form of medical communication that allow us to identify diseases and procedures, as well as study health-care trends, facilitate payment, substantiate the medical necessity of care rendered, and help vali­date that the provider's charges are reasonable.

The ICD-9-CM classification system is used throughout the United States in inpatient and outpatient facilities for medical coding. This is one of the three code sets—and the major one—that is mandated by HIPAA.